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USDALoans.com is a Mortgage Research Center, LLC Network Website

USDALoans.com belongs to the Mortgage Research Center, LLC, ("MRC") Network. MRC is a private company that provides mortgage information and connects homebuyers with lenders. Neither USDALoans.com nor MRC are endorsed by, sponsored by or affiliated with the U.S. Department of Agriculture or any other government agency. MRC receives compensation for providing marketing services to a select group of companies involved in helping consumers find, buy or refinance homes. If you submit your information on this site, one or more of these companies will contact you with additional information regarding your request. For a full list of these companies click here. By submitting your information you agree MRC can provide your information to one of these companies, who will then contact you. MRC does not guarantee that you will be eligible for a loan through the USDA loan program. USDALoans.com will not charge, seek or accept fees of any kind from you. Mortgage products are not offered directly on the USDALoans.com website and if you are connected to a lender through USDALoans.com, specific terms and conditions from that lender will apply.

USDA Loans and Investment Property

Updated November 30, 2018

The USDA loan program is designed to provide an affordable, minimal-barrier route to homeownership for low- and middle-income earners. In order to qualify, the property must be located in a USDA-eligible area and serve as the buyer’s primary residence. The borrower must also meet certain income and credit requirements, though these tend to be less stringent than other loan programs currently available.

Because they are intended for primary residence, buyers cannot use a USDA loan for investment property.

Primary Residence Requirements

USDA loans are designed to help Americans purchase their primary residence affordably and easily, so rental homes, vacation homes, farm buildings and other income-producing properties aren’t eligible.

Can you use a USDA for land?

That depends. Though purchasing land with the primary purpose of income would violate USDA regulations, buyers may still purchase land with income-producing features located on it. This would include things like barns, silos, livestock facilities and greenhouse, as long as they are not part of a commercial or income-producing operation. A barn used for storage or a greenhouse used to grow personal produce would be allowable under USDA rules.

DTI Restrictions

The USDA’s debt-to-income restrictions play a big role in why income-producing properties and large plots of lands aren’t eligible for these loans. Because USDA loans are designed for low- and middle-income earners, there are very specific rules for how much borrowers can spend on housing debt -- and debt in general.

Because larger plots of land and income-producing properties can be more expensive, both up front and in monthly costs, they are more likely to push borrowers over these DTI guidelines and disqualify them from eligibility.

Lenders can also have concerns about a primary residence becoming intertwined with a business.

Other USDA Loan Programs

Though a traditional USDA loan isn’t an option for income-producing properties like farms or multi-family units, the U.S. Department of Agriculture does have several loan options designed just for these ventures.

Using the USDA Loan for Farming

When it comes to USDA loans and farms, buyers have lots of options. The USDA actually has nine unique loans designed just for farm purchases.

These options include:

Farm operating loans

Microloans

Farm ownership loans

Guaranteed farm loans

Youth loans

Loans for minority and women farmers and ranchers

Beginning farmers and ranchers loans

Emergency farm loans

Native American tribal loans

These loans are managed by the Farm Service Agency. To be eligible, buyers need to show good credit history, be current on their debts and have proven training, experience or education in managing a farm/ranch.

USDA Loans for Multi-family Units

The USDA also offers loans on multi-family properties through its Multi-Family Housing Direct Loan program. The program is designed to help qualified borrowers increase affordable rental supply in low- and middle-income earning areas.

The loans are reserved for state and local government agencies, non-profits, federally-recognized tribes and for-profit organizations, including LLCs. Eligibility requirements include:

Rent on individual units on the property must be capped at 30 percent of 115 percent of the area’s median income.

Average rent for the entire project can’t exceed 30 percent of the area’s median income.

The property must have at least five units.

As with other USDA loans, the property must be located in a qualified rural area.

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